FINRA Conduct and Communications Rules – Series 7 Exam

FINRA Conduct and Communications Rules – Series 7 Exam
Published on https://finra-exam-mastery.com

📘 Overview

For Series 7 candidates, understanding FINRA’s Conduct and Communications Rules is essential. These rules govern how registered representatives interact with clients, promote products, and maintain ethical standards across all business practices.

🧾 Key Conduct Rules to Know

1. Rule 2111 – Suitability

• Requires reps to make recommendations in the customer’s best interest, based on:
  • Financial situation
  • Investment objectives
  • Risk tolerance
• Three main types of suitability:
  • Reasonable-basis (product is generally suitable)
  • Customer-specific (suitable for this client)
  • Quantitative (frequency of trades must be appropriate)

2. Rule 2150 – Improper Use of Customer Funds

• Prohibits misuse or conversion of customer assets
• Requires segregation of client funds
• Written authorization is mandatory for discretionary trading

3. Rule 3240 – Borrowing From or Lending to Customers

• Prohibits personal loans between reps and customers unless:
  • The firm has a written policy
  • The customer is a family member or financial institution
  • The loan is pre-approved by the firm

4. Rule 4530 – Reporting Requirements

• Firms must report specified events, including:
  • Felony charges
  • Civil actions
  • Terminations for cause
  • Regulatory violations

📨 Communications with the Public (FINRA Rule 2210)

FINRA divides communications into three categories:

1. Retail Communication

• 25 retail investors in a 30-day period
• Includes ads, social media, emails
• Requires principal approval before use
• Must be fair, balanced, and not misleading

2. Correspondence

• ≤25 retail investors within 30 days
• Includes emails, letters
• Subject to spot-check review, but not pre-approval

3. Institutional Communication

• Distributed to institutional investors only
• No prior approval required, but firms must establish supervisory procedures

🛑 Prohibited Practices in Communications:

• Promising guaranteed returns
• Omitting material facts
• Using exaggerated or misleading claims
• Not including risk disclosures

🧠 Exam Tips

• Know the difference between communication categories
• Understand the content and disclosure requirements
• Be able to apply suitability standards in hypothetical scenarios
• Expect questions on reportable events and client fund handling

🎓 Master Series 7 Conduct Rules with Finra Exam Mastery

Our Series 7 course includes:

• 🎥 In-depth video lessons on FINRA rules
• 🧪 Practice questions with real exam format
• 📝 Rule summaries and cheat sheets
• ✅ Lifetime access with all 2025 updates included

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Ethics and communication aren’t just test topics—they’re your foundation for a trusted financial career.